The Santa Monica-Malibu Unified School District ended the 2025-26 school year $6 million in the black after projecting a $3.7 million deficit.

Assistant Superintendent of Business Services Gerardo Cruz presented the unaudited year-end financial report at the board's Wednesday, Sept. 9 meeting, calling it a roughly $9 million improvement over earlier estimates. The board voted 4-0 to accept the report. Board President Alicia Mignano was temporarily away from the dais during the vote.

Two factors drove the swing, according to Santa Monica Next: revenues came in $6 million above projections, and expenditures landed $3.6 million below.

About half the revenue gain traces to the January 2025 Palisades and Franklin fires. The state backfilled roughly $3 million in lost property tax revenue, and a separate $1.3 million in restricted reimbursement covered students who enrolled during the fires. Cruz described all wildfire-related revenue, about $4 million total, as one-time money that will not recur.

On the spending side, the district saved $2.4 million on legal fees, consultants, conferences and other operating costs. Salary and benefit spending came in just $344,000 under projection. Cruz called that a marked improvement over prior years, when that gap ran into the millions.

Cruz also flagged a small but permanent gain. New West Charter School, which previously operated under SMMUSD authorization, has shifted to Los Angeles Unified. That eliminates roughly $290,000 the district had been transferring annually, dropping its charter payment obligations to about $10,000 a year.

The surplus brings district reserves to approximately $30 million, or about 29% of general fund expenditures. School Services of California recommends 33% for basic aid districts like SMMUSD.

The cushion matters because the district still projects deficit spending for the current fiscal year and the next two. The adopted 2026-27 budget shows $226.2 million in revenues against $237.9 million in expenditures across all funds. In a July 15 press release accompanying that budget, Cruz said the district planned for the gap through its multiyear financial strategy and would continue identifying efficiencies to reduce deficit spending.

Board member Jennifer Smith asked Cruz to draw a clearer line in future presentations between one-time revenues and recurring funds, so the district avoids building programs around money that will not return. Cruz agreed. He committed to showing a "more direct linear line" connecting restricted categorical funds to general fund relief.

Separately, Superintendent Antonio Shelton updated the board on ongoing HVAC problems at Santa Monica High School and at least one other campus. As we reported after the board's Sept. 3 meeting, the board approved an emergency resolution after teachers described classrooms reaching 80 degrees. Shelton said staff have begun a comprehensive audit of affected systems, installed temporary cooling units and engaged Siemens and a second vendor to develop both short- and long-term fixes. Shelton said written responses to questions from Samohi teachers would follow.

The district's audit firm is scheduled to begin fieldwork on the 2025-26 financials, with a final audited report expected in December or January.